Spotlight on rentals

While the improving economy and higher income levels should boost rents in 2001, it's unlikely to be a year of major rent hikes.

Tuesday, February 6th 2001, 8:58AM

by Paul McBeth

While the improving economy and higher income levels should boost rents in 2001, it's unlikely to be a year of major rent hikes.

That's the word from the latest Residential Property Investor, which says wage and salary increases during 2000 have made rental properties more affordable and could lead to tenants upgrading their accommodation. However, it says that demand is unlikely to increase dramatically and there's still an oversupply of property on the market.

Rents were fairly stable last year but, unlike 1999, the number of bedrooms that a property had made an impact on price movements. For example, rents for one-bedroom properties rose by half a per cent nation-wide while two-bedroom properties saw rent increases of nearly two per cent.

Prices for four-bedroom dwellings fell towards the middle of the year but then recovered to be two per cent higher by November/December. Three-bedroom houses, the largest category, were the only ones not to see any rent gains last year.

Meanwhile, some areas posted strong rent gains in 2000 - Queenstown had across-the board gains of around seven per cent, for example - while others had mixed fortunes. In Dunedin, rents in the central city fell about four per cent over the year, but the Northern-Central or University area was up seven per cent.

The Residential Property Investor also points out the importance of keeping in touch with local industry and institutions, given the effect they may have on rental demand. In Southland, for example, the Southland Institute of Technology has introduced a zero-fee scheme this year that's boosted applications from out-of-town students by 15 per cent and will see 700 extra students attend this year alone.

Meanwhile, the reverse is happening in Palmerston North as Massey University suffers falling rolls, possibly because of their new Auckland campus.

Looking ahead to 2001, aside from the oversupply of property on the market the other potential dampener on prices is the effect of income-related rents for state housing. ANZ Chief Economist Bernard Hodgetts says that regions with a large number of state houses mixed with private rental property, such as South Auckland and Porirua, will be particularly affected but the upper end of the market may remain unscathed.